Private equity executives are increasingly turning to borrowing against their future share of profits from successful deals, known as "carried interest," as a prolonged deal drought delays traditional payouts. This trend is driven by an environment where average holding periods for private equity investments have stretched to seven years, up from a historical norm of five to six years. The theoretical backlog of unrealized profits for dealmakers is substantial; for example, Blackstone, KKR, and Carlyle combined had nearly $17 billion in potential carried interest from investments in the black but not yet sold in 2025, a significant increase from $5 billion in 2018.
This borrowing is a response to a liquidity problem in the private equity ecosystem, where cash is not flowing through the system as it once did. The solution, an increasing number of executives are turning to, is the carried interest loan, which allows them to borrow against the forecast value of carry they expect to receive based on current fund valuations, even for unrealized holdings. Inquiries for such loans to London broker Enness Global surged to 459 between January and mid-June 2026, more than triple the 134 inquiries in the same period last year. Islay Robinson, founder of Enness, noted unprecedented demand, with two to three transactions closing per month in 2026.
Private banks, including UBS, Citi, and Deutsche Bank, offer these loans, which are secured against the forecast carried interest rather than personal assets. This structure suggests lenders believe in the eventual realization of these carry positions, albeit with conservative assumptions. However, the loans typically only cover 20% to 30% of the carry's value due to the uncertainty of when assets will be sold. Some senior professionals are also leveraging hard assets like vacation homes in the Hamptons, using second and third liens on these properties as additional collateral to borrow more against carried interest.
While these carried interest loans provide immediate liquidity and allow executives to meet financial obligations and make new fund commitments, they also introduce risks. These risks include the uncertainty of the realized value of carried interest, potential market volatility impacting fund performance, and the possibility of lower-than-expected returns that could complicate repayment. Critics, such as Carlos Conceição, view this as risky behavior that could build systemic risks within the PE sector, potentially impacting main street businesses, hospitals, and day care centers if a "day of reckoning" occurs. Others, like Patricia Stephen, see it as a short-term flexibility that adds risk if exit timelines continue to stretch.
Industry leaders have historically seen significant payouts, with Steve Schwarzman of Blackstone receiving over $970 million and Jon Gray earning about $749 million in carried interest and other incentive fees over the decade ending 2025. KKR co-founders Henry Kravis and George Roberts each reaped about $550 million in the same period. However, the current environment is making it harder to realize these windfalls, prompting the reliance on borrowing. Tim Ivers, founder of Warana Capital, noted that inquiries from executives at smaller private equity firms for carry loans have doubled this year, offering loans up to $25 million.
